How can a mobile messaging service be worth $28 billion?

Yesterday there were reports that Line, a messaging company that has gained strong traction in Japan and other parts of Asia, is planning an IPO at a rumored valuation of $28 billion. That figure certainly surprised a lot of people, in particular us at TNW who believe it to be somewhat inflated, but it isn’t as crazy as you might think.

First, here are some core facts about Line and its two-year-old business:

Line has 230 million registered users, but the company declines to revealed how many are active users (it says 73 million use its timeline feature per month)

Though it has a core messaging service, it has more than 50 connected apps (available on Google Play and the App Store) which have clocked more than 290 million cumulative downloads

Line has 47 million registered users in Japan — that’s over 35 percent of the population and almost half of its ‘Internet population’

Line has 18 million registered users in Thailand and 17 million registered users in Taiwan — where Facebook has 21 million and 15 million respectively

Most of the surprise around Line’s valuation is because it is ‘just a messaging company.’

Well, that’s not exactly true.

While rival services like WhatsApp are designed to replace or enhance SMS, Line’s ambition runs a lot deeper. It is really a mobile-first version of Facebook and, as we said way back last summer, it is among the messaging apps that are providing stiff competition for Facebook in Asia.

But there’s more — Line is really a content and communications platform on mobile.

Already it acts as a network for distributing games, digital content and there are plans to introduce e-commerce, music and perhaps other services in the future. The company also makes money by charging companies to use its network to communicate advertising and marketing messages to users that opt-in to receive them.

Then there’s Line’s growing offline commerce business, which has made $40 million in revenue to date, primarily from Japan. The company has Angry Birds-like characters, which — aside from starring on its sticker packs and in ad campaigns — are fronting cartoons and available as plush toys and other merchandising.

With its fast-growing network of drivers, Uber is a business that could expand to offer physical goods, delivery, and pretty much any service that can benefit from its distribution capacity.

In that same way, Line’s position as a core app on millions of people’s smartphones makes it a platform that could deliver any kind of digital good or service to a large audience of users.

If Facebook is worth $120 billion in today’s market, Line theoretically has a multi-billion dollar business on its hands — but making it real isn’t easy. The real question is whether Line can scale successfully out of its few strongholds and build robust networks of users in other countries.

While that thought percolates, enjoy this Line and Hello Kitty video from Japan. (You’re welcome.)